Oct. 30 (Bloomberg) -- Lockheed Martin Corp.’s F-35
fighter, the U.S. military’s costliest weapons system, is likely
to be ready for expanded production in fiscal 2015, according to
the Pentagon’s top weapons buyer.

“While risks remain, progress on the F-35 program at this
point has been adequate to support a decision to budget for
increased rates,” Frank Kendall, under secretary for
acquisition, said in a decision memo to the Air Force and Navy
secretaries dated Oct. 28.

Kendall said that the award of annual contracts for
increased quantities is contingent on improvements in software
development, reliability -- which he said “is not growing at an
acceptable rate” -- and available funding, as the Pentagon
faces billions of dollars in automatic cuts known as
sequestration.

“The magnitude of the increase will be determined” by
Defense Secretary Chuck Hagel as the Pentagon “finalizes its
fiscal 2015 budget,” according to the two-page Kendall memo
circulating inside the Navy and Air Force. “Progress in the
development program has been close to plan,” Kendall said.

Kendall’s decision memo outlines the findings from a
Defense Acquisition Board program review on Oct. 21. While the
memo isn’t a guarantee that quantities will be increased in
annual contracts, it indicates Kendall is confident that money
can be budgeted in the five-year fiscal 2015 plan to be released
next year.

Lockheed ‘Prepared’

“We appreciate Secretary Kendall’s confidence in the
progress made by the F-35 program, including recognizing the
continued development progress,” Lorraine Martin, Lockheed’s
F-35 program general manager, said in an e-mailed statement.

The company is “working closely with the F-35 Joint
Program Office to further the reduction of both production and
operating costs,” she said. “We are prepared for an increased
rate of production in fiscal 2015.”

The Pentagon’s current five-year plan calls for increasing
F-35 production to 42 jets in fiscal 2015, which begins Oct. 1,
2014, from 29 this year and in fiscal 2013. The rate would
increase to 62 in 2016, 76 in 2017 and 100 in 2018, according to
internal Pentagon budget documents. The new plan will be
released next year with the Pentagon’s fiscal 2015 budget plan.

The Pentagon’s projected price tag of $391.2 billion for a
fleet of 2,443 aircraft is a 68 percent increase from the
projection in 2001, as measured in current dollars. The number
of aircraft also is 409 fewer than called for in the original
program.

Rising Costs

The rising costs and troubles in building the plane at the
same time that it’s being developed have led to criticism in
Congress. This year, lawmakers, the Government Accountability
Office and the Pentagon test office have said the aircraft is
making progress in flight tests and in stabilizing production.

Kendall said that “because of the uncertainty with
sequestration and in order to provide a linkage between program
performance and production quantities,” the Pentagon’s F-35
program office should obtain proposals from Bethesda, Maryland-based Lockheed “for a range of production quantities and
variants in 2015.”

Kendall directed the program office, the Navy and the Air
Force to provide by Nov. 15 an acquisition strategy for award of
a ninth production contract that includes “financial
incentives” for Lockheed and United Technologies Corp.’s Pratt
& Whitney unit, which makes the F-35’s engines, “to complete
development and drive down both production and sustainment”
costs.

Among the lagging software that Kendall said must be put on
track are a primary system that he said is “essential to
achieving the desired combat capability” and the Autonomic
Logistics Information System, which keeps track of maintenance
actions, spare parts and other routine tasks necessary to keep
the aircraft flying.